How to pricing your products for profit
December 6th, 2006 by kelvincho
Advice on how to remain competitive through correctly determining export costs and selling prices.The price of your product should be high enough to generate a suitable profit but low enough to be competitive.
Each step along the market channel has a cost. If a product is new to the market or has unique features, then you may be able to demand a higher price. Conversely, if you are trying to gain entry (market share) into a competitive market, you can use a concept called marginal cost pricing, where you set your price in the market at or just above the point where you would incur a loss. If you do incur a loss, you may be accused of “dumping†which is illegal under WTO rules.
Most new traders determine price by taking the domestic factory price plus freight, packing, insurance and so on. The table below illustrates how the selling price in one country becomes the buying price in the other. Typical commissions are between 7 and 20 percent for an export middleman and between 5 and 20 percent for an import middleman (agent), but there always exceptions to the rule.
| Exporter Costs (Country 1) |
| Costs of manufacturing· Export commission
· Freight Forwarder Fee · Freight to Port · Consular Invoice · Export Packing · Foreign distributor/agent Fee |
| Selling Price |
| Importer Costs (Country 2) |
| · Buying price· Marine Insurance
· Freight Port to Port · Brokerage costs · Duty (Tariff) · Tax · Freight in (port to receipt) Banking costs |
| Landed cost |
| Profit marginExpenses
· Distributor commission · Repacking · Freight out · Salary · Interest Postage |
| Landed cost + expenses |
| Sales Price |
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